“Bigmouth strikes again
And I’ve got no right to take my place with the human race” 

 

 

Following on from ”Long Hot Summer” we continue the theme of “noise”.  

 

Typically, this emanates from shouty right-wing politicians, who seem always to be foaming at the mouth about something. In this, they are supported by their adoring media who love stirring-up resentment, with stories that often have no basis in-fact. 

 

Immigration is a subject that really motivates them, and result in all manner of hateful, baseless comments. For example: 

 

• White Britons will “become a minority in the UK population within the next 40 years” 

• “London’s decline is now irreversible”“ 

• “Starmer and Farage have doomed Britain to an endless spiral of decline”. 

• “Low-skilled, non-western immigrants” are a “burden” on the country. We need “a detailed plan to take foreign nationals off the benefit system and remove them from the country”. 

• The “majority of Brits say UK ‘is in decline’ and fear civil unrest” 

• A coming “revolution”, one born from the effects of immigration, state failure and economic stagnation.  

 

This isn’t new, in 1978 Thatcher spoke of the fear that “that this country might be swamped by people with a different culture”. Whist it is clear that the country is declining, it is due primarily to our stagnant economy and ever-shrinking state, rather than our racial demographics. 

Tory peer David Frost adds wokeism to immigration, warning that under the twin evils of immigration and “aggressive wokeism”. Britain had undergone an “unprecedented break in national continuity” – gone are the days of “Britain of Christianity and the church”.   

What we are witnessing isn’t new, it’s a return to the politics of the 1930s; the hard-right using a mundane economy and a struggling majority to stir-up hate for their own pet dislikes. They conveniently avoid mention of policies that might actually help to stem the sense of economic decline felt by the majority, such as wealth redistribution. Equally, those propagating the message of decline avoid the role of austerity in dismantling the state.  

 

‘it’s a return to the politics of the 1930s; the hard-right using a mundane economy and a struggling majority to stir-up hate for their own pet dislikes’

 

By laying the blame at the door of racial demographics they are seeking to avoid changes that are an anathema to them. 

 

Climate change is their latest bête noire. 

 

After their success in the local elections, Reform-led councils are destroying climate pledges: 

 

• Durham county council has proposed a motion to rescind a 2019 declaration of a climate emergency. 

• West Northamptonshire council looks set to become the first to scrap net zero targets. 

 

Ironically, in December, Durham received a national award for best carbon reduction for its work over 15-years to tackle the climate crisis. Mark Wilkes, Durham’s climate lead under the previous LibDem administration, said the Reform motion was both “morally reprehensible” and “economically illiterate. Over the last few years, we have secured millions of pounds of external funding and have reduced council costs through our climate emergency plans and invest to save projects.”  

Another Reform councillor, Bert Bingham, who serves as Nottinghamshire’s’ environment lead called human-made global heating a “hoax”, statistics were “manipulated” and that “people have been brainwashed over time through the media”! 

A more thought-out opinion came from Mike Kendon at the Met Office who said: “Breaking records frequently and seeing these extremes, this is now the norm…We’re moving outside the envelope of what we’ve known in the past. 

“The extremes have the greatest impact for our society, if we think about our infrastructure, our public health, and how we function. So this is really of profound concern.”  

Turning to the economy, the cost-of-living crisis shows no sign of receding, with the Office for National Statistics reporting that the consumer prices index increased at a higher than expected rate of 3.6%, in June. 

 

‘the cost-of-living crisis shows no sign of receding’

 

Food prices are currently at an annual rate of 4.5% – the fastest since February last year. The costs of furniture and household goods made their largest contribution to inflation since December 2023. 

Whilst the government isn’t being helped by a moribund economy, it is doing little to change it. 

What is most depressing is the fact that Labour are increasingly supporting the hard-rights message, which is, or at least, was, against all that the party stood for. Today, they are closet-Tories, shrinking the state by reducing benefits for pensioner, the disabled and special needs children. 

But, don’t worry the chancellor has a plan. We are going to stimulate growth…yawn! 

On the plus side we aren’t repeating the unfunded tax cuts of “loopy liz” Truss. Instead, we are going to deregulate the City. Or, we are repeating the GFC? 

The crisis came about because policymakers bowed to the pressure from big finance to sweep away “burdensome” regulations, on the premise that more funds could be channelled into productive investment. 

Instead, a sea of easy money led to ever increasing speculation and  giant credit bubble. The inevitable crash led to a deep recession, the bailout of the banks and a tightening of regulations. 

Today’s financial sector is less a source of productive capital than a machine for asset inflation, property speculation and leveraged buyouts. 

 

‘we are going to deregulate the City. Or, we are repeating the GFC?’

 

This should have signalled the end of Thatcherism and neoliberalism, instead QE inflated an ever increasing asset bubble. In order to recoup the banking bailout money, successive governments have practised austerity, slashing services, pushing an ever increasing number into poverty.   

Known as the “Leeds reforms”, the chancellor said of her plans: 

“I have placed financial services at the heart of the government’s growth mission – recognising that Britain cannot succeed and meet its growth ambitions without a financial services sector that is fighting fit and thriving. She claims the reforms would have “a ripple effect that will drive investment in all sectors of our economy and put pounds in the pockets of working people”. 

Ripple effect, Trickle-down; if I had a pound for every time I heard this claim I would be in-line to pay wealth tax! It doesn’t work. There is no evidence to show that it does nothing other than gush wealth upwards. I have written about this ad nauseum, but “Poverty and Inequality” has the most detail.  

Sara Hall, co-executive director at Positive Money, said: “The experience of recent years, as well as a wealth of academic evidence, shows that expecting growth to ‘trickle down’ from the financial sector simply does not work.” 

So, we are going back to pre-GFC days, when regulators allowed banks to overindulge in risky practises they didn’t understand. Today, it is revisited in order to boost economic growth. 

Reeves believes that: “In too many areas, regulation still acts as a boot on the neck of businesses, choking off the enterprise and innovation that is the lifeblood of growth. 

 

“expecting growth to ‘trickle down’ from the financial sector simply does not work.” 

 

“Regulators in other sectors must take up the call I make this evening, not to bend to the temptation of excessive caution, but to boldly regulate for growth in the service of prosperity across our country.” 

It sounds wonderful, but then your read the small print. 

Proposals to “radically streamline” accountability rules for senior bankers; meaning they can return to doing as they please. 

Most amusingly, this was announced at the same time that Barclays were fined £42m for the “poor handling” of financial crime. 

There are also plans to review the ringfencing rules introduced after the 2008, to protect consumer cash from a bank’s riskier business activities. 

But, my favourite has to be mortgages, which, you might recollect, were the prime culprit leading up to the GFC. 

Reeves proposes to allow lenders to offer riskier mortgages with income multiples in excess of 4.5x a borrowers’ annual income, aimed at enabling first time buyers with lower salaries to get on the housing ladder.  

Aside from taking on unserviceable debts, this would stimulate demand which, in-turn, will increase house prices. In short, they could still priced out of the market. 

The proposal is that the banks will be protected for undertaking riskier lending by a permanent government-backed mortgage guarantee scheme, paid for by us taxpayers. 

In 2008, we paid anyway. Who else funded the bailouts? 

This is banking nirvana; high-risk loans with higher margins, and the default risk borne by taxpayers. 

 

‘This is banking nirvana; high-risk loans with higher margins, and the default risk borne by taxpayers’

 

And, investors can run riot, too. Risk warnings attached to investment products will be reviewed to ensure that people are “accurately” judging risk levels. How can the man on the street judge risk? The highest paid fund managers don’t always get it right. 

Just to make sure that the madness comes full circle, there are plans to let banks send information about “investment opportunities” to savers who have cash sitting in low interest rate accounts, encouraging them to shift money to stocks and shares. 

Taking money from deposits does several things, including lower the deposit base available to fund mortgages putting an over-reliance on wholesale funding and securitisation, and weakens banks capital ratios.  

Encouraging households to put their savings into equities, or to take on larger mortgages, does nothing for our broken economy. It will simply shift more risk on to households already burdened by wage stagnation and unaffordable housing. 

Chaitanya Kumar, head of economy and environment at the New Economics Foundation thinktank, summed it up: “It feels like groundhog day. We’ve been here before, expecting the financial sector to do most of the heavy lifting in terms of growth. 

“The 2008 crash and what followed should have been a very strong lesson to everybody in not completely letting the financial services sector off its leash: but that’s what we seem to be doing. I just haven’t seen any evidence that deregulating the financial services sector is going to create significant growth.” 

 

‘Encouraging households to put their savings into equities, or to take on larger mortgages, does nothing for our broken economy’

 

Jesse Griffiths, chief executive of the Finance Innovation Lab charity, said:  “Instead of a more ‘globally competitive’ financial sector, we need reform to better serve UK businesses and drive domestic investment to where we need it, particularly for the green transition that will lower people’s bills and create the good jobs of the future.” 

The chancellor is right to be worried the economy is not in a good place; GDP fell in both April and May, and CPI is increasing. 

And, so is unemployment, likely fuelled by the increase in employers’ NIC.  

Government borrowing is high and the U-turns on the winter fuel allowance and welfare payments, alongside weak growth, mean Reeves is likely to break her self-imposed fiscal rule. Some economists suggest the shortfall could be as much as £30bn. 

To overcome this she could look to increase taxes, but this could impact both business and consumer confidence, slowing the economy in the process, adding to pressure for further austerity measures.  

Alternatively, she could turn to the Gilt market, but we are still under the microscope due to loopy Liz. As a result, should the chancellor break her fiscal rules, the coupon would likely increase. 

More palatable options lie with the Bank. 

 

‘she could turn to the Gilt market, but we are still under the microscope due to loopy Liz’

 

Firstly, given the moribund nature of the economy, they could be more aggressive in cutting rates. 

Also, they could halt sale of bonds under their quantitative tightening programme, where they are selling back the bonds bought under QE into a falling market, increasing the loss underwritten by the government, and increasing ongoing debt interest costs. 

Lastly, the 4-major banks are holding > £9bn of their risk-free reserves with the Bank on which they are being paid 4.25%. There are better uses for this money. 

Lastly, there is a wealth tax, a much more targeted tax than general increases. 

However, I doubt we would be effective in collecting this, as a report by the Public Accounts Committee (PAC) said HMRC could not say how much the super-rich either contributed to the exchequer or avoided. 

 

‘Everything seems to be revisionist, little Britain and Thatcherism’

 

The report found that specific work by tax officials on wealthy individuals had brought in an extra £5.2bn of revenue in 2023-24, up from £2.2bn in 2019-20. However, it said the increase suggested either wealthy non-compliance had got worse, or that previous estimates of tax avoidance were too low. 

Lloyd Hatton MP, a Labour member of the PAC, said: “Our report shows that, however you slice it, there is a lot of money being left on the table.”  

For all the noise there is little to no substance. Everything seems to be revisionist, little Britain and Thatcherism. 

The Leeds reforms will boost asset prices, and further undermine regional inequality, enriching the City, not the nation. This isn’t how you build a resilient, innovation-led economy for all, it is the continuation of asset-led prosperity for the few. There is no historical evidence that, post-1980, financial markets will support investment, let alone decades of underinvestment. 

It’s time to move on.  

 

 

“You think you’re smart, stupid, stupid” 

 

‘Readers must be as depressed reading all this doom and gloom as I am writing it.

To say that this government is a disappointment would be seriously understating the case. I can at least take some comfort in the fact that when I wrote in “It’s not the economy, stupid, it’s inequality”, in May 2024, “Labour have become; Tory lite.”

Economically, it is just a sea of depression; rising inflation, rising unemployment, stagnant / falling GDP. And the answer to all of this is deregulating the City, and we all benefit from the trickle-down effect.

Really, this is beyond sad. Loopy Liz was, well, Loopy. Starmer and Reeves, plus the supporting cast are just stupid. It really is becoming increasingly difficult to find anything complimentary to say.

They are politically inept, picking-on pensioners, the disabled and special needs children. But, when they are out of government, it is the City and its supporting cast that these failed politicians will look to with commensurate rewards.

Alongside this we have their frankly pathetic attempts at party discipline, 4 MPs lost the whip this week, and they are again training their guns on Diane Abbott.

Starmer might be better served remembering the platform he was elected party leader on, and then he wouldn’t have these problems. Given how far he has shifted from that manifesto, he could well be prosecuted under the trade description act.

The only positive I can think of is, than heavens they weren’t in government when Covid struck!

Lyrically, we start with The Smiths and “Big Mouth Strikes Again” for all those right-wing racists. We finish with ABC and “Shoot that Poison Arrow”, because they are stupid, stupid!

I’d enjoy going to the dentists more

Philip.’

 

@coldwarsteve

 

 

Philip Gilbert is a city-based corporate financier, and former investment banker.

Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s

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